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Business start-ups: Can Nova Scotia give them what they need to thrive?

By John Soosaar

- Originally published in the May 2014 issue of the Nova Scotia Business Journal -

Some Nova Scotia start-ups are making their mark around the world much as the province’s sailing fleets once did. They’re producing a new generation of entrepreneurs pushing the boundaries of information technology.

ICT has been one of the fastest growing industries in the province accounting for an ever-increasing percentage of Nova Scotia’s GDP, and alongside such giants as IBM, Xerox and CGI, much of it is being generated by start-ups with names like Velsoft, GoInstant and Compilr.

The success of Nova Scotia IT start-ups is being tracked south of the border. Two years ago GoInstant, a Halifax firm developed by two young Nova Scotians, invented a system that allows people on different computers to work together on the same screen. It was sold to Salesforce.com for more than $70 million. More recently, Halifax-based Compilr, a software coding and development start-up, was sold to Lynda.com of California for a reported $20 million. In both cases the companies will remain here.

“Nova Scotia is becoming a more and more attractive place to start a tech business,” says Robert Niven, president of CarbonCure Technologies Inc., a Halifax-based company that develops clean technology solutions for the concrete industry by capturing carbon dioxide in its masonry products during the manufacturing process.

The technology provides a cost-effective solution to reduce greenhouse gas emissions.

Niven says Nova Scotia’s small economy and government act as an incubator for start-ups.

“The technology community is getting larger and new generations are coming in. The prior generations are helping these entrepreneurs get established and teaching them the lessons learned.”

Stephen Duff, president and CEO of Innovacorp, says they have 47 companies which have received early-stage investment or are in incubation facilities. Seventeen are ICT companies, nine are clean tech, nine are life science and two are advanced manufacturing.

He agrees with Niven that experienced business mentoring is an important factor in bringing start-ups into production.

“There are experienced individuals that have built excellent companies, perhaps have started other companies. Fostering access to that type of talent for early-stage companies is probably the single biggest gap we have in our ecosystem.”

Duff says other challenges for start-ups include lack of access to talent and risk capital. Standardizing the equity tax credit among provinces and increasing it, he says, would bring in more “high network” investors operating as independent angels or angel networks.

“When we have a nice portfolio of venture grade opportunities here, we’re going to attract a lot of venture capital from outside the region. Last year we did 11 deals. We committed $5.1 million in equity in those deals. Those deals leveraged something in the order of $8.5 million in venture capital from outside of our region.”

Online training and education solutions company Velsoft Training Materials Inc., part of the newer generation of start-ups, has grown from a spare room in CEO Jim Fitt’s New Glasgow home into a company exporting training software products to over 10,000 customers in 164 countries from its downtown Provost Street location.

Founded in the late 1990s, the company has had “a roller coaster run with highs and lows” Fitt admits, particularly after the dot-com collapse, but rallied in recent years and was named Nova Scotia Business Inc.’s top exporter of the year in 2013.

Much of Velsoft’s workforce is in locations around the world so in order to communicate the company needed an online collaboration tool and Fitt eventually found Head Space, a small Halifax digital marketing firm that was working on similar technology and eventually purchased its intellectual property and formed Extrify Software. The company recently won Innovacorp’s I-3 Technology Start-up competition for zone one and $100,000 in cash and services. The competition finds and supports high-potential, early-stage Nova Scotia knowledge-based companies, and encourages entrepreneurship across the province.

The Ivany “Now or Never” report emphasizes the importance of nurturing homegrown business start-ups in order for the province to grow and prosper, and sets a target of 4,200 new business start-ups per year by 2024. This is a 50 per cent increase over the current 10-year average.

Fitt believes that goal is entirely achievable with the number of aspiring entrepreneurs in Nova Scotia, and he thinks the IT sector will lead the way.

“Having start-ups that are scalable is where we’re going to see the greatest amount of success… that’s where you’re going to reach a global audience,” he says.

In a high-growth sector, one business can sometimes grow into two or three, says Fitt. As an example, Velsoft created a technology and that eventually became worthy of its own business Znanja.

Last year Innovacorp had a record 228 provincial start-up submissions for its semi-annual I-3 Technology Start-up competition. The overall winner of $225,000 in cash and in kind services this year was Heimdall Networks of Sydney, an information technology company.

Duff says it’s important to help nurture the 218 companies who didn’t get any prize money so that they can refine their ideas.

“I’m a firm believer that the future of this province and its prosperity is going to be tied to the extent of entrepreneurial activity. When we see people stepping forward to start companies… we need to pick the winners because we need the high potential ones, but it doesn’t mean that we abandon the rest,” he says.

Duff believes, as a province, we need to get behind entrepreneurs and celebrate them. He quotes a section of the Ivany report which says that there is some negativity and a tendency to stigmatize success and resist change.

“Way too often I’ve seen where someone is successful and has built something and some people don’t look at that through a favourable lens,” he says.

An attitude change is in order.

View the full Nova Scotia Business Journal article here and the complete May 2014 issue here.

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